Savings can help provide a safety net for emergencies. However, investing is essential to achieve future financial goals.
Fremont, CA: Money management is an important method that everyone needs to practice because having a well-organized with money is essential for living a financially stable life.
Here are four major rules of money management that should be followed to live a sound financial life:
If not used responsibly, the accessibility of credit can prompt excess spending, quickly pushing a user into a debt trap. Avoid taking out loads just for discretionary spending and ensure that the equated monthly instalments (EMIs) do not cross over 20 percent of the income if one has to borrow.
Don’t Spend More than what is Earned
It is important to comprehend if the expenses are aligned with the income. If the expenses are not monitored diligently, it can quickly deplete all the income even before the month ends. Spending can even get easier for credit card users as it creates an illusion of higher affordability, shelling out more than what is earned.
Invest for the future
Savings can help provide a safety net for emergencies. However, investing is essential to achieve future financial goals. It is not practical to let the savings lying in deposits or saving accounts since inflation can eat into its value. After saving up a principal sum for emergencies, invest the savings in an appropriate financial instrument to grow that money.
Save at least 10 Percent of Income
According to financial planners, 10 percent is the minimum that should be saved separately at the start of the month before spending. This saving can either be automated in a liquid fund, begin a recurring deposit, or transfer into a secondary savings account.